Price targets

While some of that earnings optimism has been priced into markets, analysts see scope for more gains. Converting aggregated 12-month price targets for Stoxx 600 members implies about 9 per cent upside for the index from current levels, while for the S&P 500 the implied gain is about 10 per cent and for Asia 21 per cent.

“There is a lot of dip-buying power on the sidelines and any correction that might be justified could also be short-lived.”

Salm-Salm & Partner portfolio manager Frederik Hildner

For Ben Laidler, global markets strategist at Etoro, the reopening trade “hasn’t even started yet.” For companies like restaurants, tour operators, airlines and hotels, earnings are still down 85 per cent from where they were coming into this crisis, he said on Bloomberg TV, leaving clear scope for a rebound.

Luc Aben, chief economist at Kempen & Co., has a positive view on value equities. “These are over-represented in sectors that were greatly affected by the coronavirus pandemic,” he said in a note. “If the recovery persists, the style rotation could get going again.”

Yet such bullish sentiment doesn’t come without a hint of exuberance and it wouldn’t be the first time that investors were caught on the wrong foot.

“I’m a believer that the market moves in whatever direction hurts the most participants,” said Dave Lutz, head of ETFs at JonesTrading Annapolis. “If all the analysts on the Street are bullish, I’d be very cautious,” he said in a note.

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Right now though, markets are in no mood for a correction. The last time the S&P 500 Index saw a peak to trough decline of 5 per cent or more was 193 days ago, about twice the long-term average.

“There is a lot of dip-buying power on the sidelines and any correction that might be justified could also be short-lived,” Salm-Salm & Partner portfolio manager Frederik Hildner said by phone.